WeChat Embarks on Large-scale NFT Regulation on its Platform
Leading Chinese social media platform, WeChat has initiated a large-scale regulation process that involves the banning and restriction of NFTs that do not meet up to its recently stipulated conditions.
Recently, the platform, through its parent company, Tencent modified the rules guiding NFT projects resident on its platform. The stipulated rules were observed as proactive measures that would enable Tencent to comply with the regulatory requirements of the larger body being the government of China. Essentially, the new rules are aimed at discouraging the government from clamping down on the industry as it did on cryptocurrencies and activities related to them.
In line with the new regulations, all projects involved in the minting and delivery of digital collectibles are required to provide certificates of cooperation with blockchain companies that are registered with and approved by the Cyberspace Administration of China. This will only qualify them to operate on the platform, while all forms of secondary transactions remain unsupported.
WeChat’s NFT program for now only supports the display of NFTs in the form of digital collectibles and first-level gifts. Extending them to multi-level circulation within the platform or its digital ecosystem is not allowed. According to WeChat’s regulatory setup, any project found to be violating these standards or attempting to bypass them will be banned and immediately removed from the platform. This however is not a final guideline, as the platform stated that it will continue to monitor developments in the industry and make appropriate adjustments where and when necessary.
This step by WeChat, with its capacity of over 1.2 billion users is a proactive one and an expression of compliance with the government of China. The government’s resistance to cryptocurrencies and related activities is clear, especially since the clampdown that started in the middle of 2021. Its body language towards NFTs has also been an obvious development, with outright communication of the disapproval of the emergence of another speculative market, like in the decentralized crypto industry.
In China, NFTs are referred to as digital collectibles, rather than tokens. This is in the attempt of dissociating NFTs from the much-opposed cryptocurrencies. Cryptocurrencies have been criticized in China for adversely affecting the country’s financial sector by enabling unsupervised transactions. Such transactions have been assumed as enabling elements of different forms of financial crimes, including money laundering, and fraud. Apart from that, the Proof of Work (PoW) systems for mining Bitcoin and other cryptos do not align with China’s goals toward carbon neutrality. Hence, the holistic clampdown on the entire industry.
With the growing popularity of NFTs, tech giants in China like Tencent and Alibaba have joined the queue in the adoption of the emerging technology. According to predictions, the NFT market in China is expected to grow at an annual rate of 150%, reaching a market size of around $4.64 billion by 2026. This is a huge market to be allowed to slide away based on avoidable situations.
WeChat’s actions represent an early start in the race for compliance. By communicating its willingness to adjust its rules to suit the government’s regulation, the platform is showing its hands already and expressing its willingness to support the government. This could be a welcome development for a market with so much potential for the particular region. With the right rules, there can be a balance within the emerging industry that will promote sustainability, unlike the crypto industry that became balkanized after just over a decade.